Call for greater transparency around platform charges
27 September 2018
AJ Bell has called for greater transparency around platform charges in its response to the FCA’s Platform Market Study interim report.
As the deadline for platforms to respond to the FCA closes, the firm said it would like to see further disclosure of platform charges, regulatory guidance on bulk platform transfers, a lift of the ban on cash rebates and improved standards and more transparency for model portfolio disclosures.
Andy Bell, chief executive of AJ Bell (pictured), said he would support the regulator forcing platforms to publish the amount of revenue they make on a yearly basis from assets under administration.
This method would, according to Bell, cut through the complexity created by different platform charging structures and show people the level of charges each platform levies per pound invested.
Bell said: “I’d like to see a requirement for platforms to publish this figure prominently on their website as pounds of revenue per £100,000 of investment, rather than a basis points measure. I’d also like to see this taken a step further with platforms required to have a calculator on their website that shows customers the annual charges that potential and existing customers will pay in pounds and pence for year one and year two if it is substantially different to year one.”
AJ Bell has also called for regulatory guidance on bulk platform transfers, arguing that switching is the area most in need of regulatory intervention, particularly around the suitability requirements for moving advised clients between platforms.
Bell commented: “Many advisers are put off moving clients in bulk because of the individual suitability requirements, even where it is clear a better-value option is available to a particular cohort of an advisers’ clients. Guidance from the regulator on what it expects of advisers in these situations could make the process easier for advisers, improve competition in the market and result in increased value for money for those involved.”
Bell said another barrier to platform switching was the amount of multiple share classes, which has made the process of transferring between platforms harder in cases where investors hold a share class that is not available on the platform they want to transfer to.
In his response, Bell outlined: “Moving back to a single retail share class for each fund with discounts applied in the form of cash rebates payable for the benefit of customers rather than the platform would make the process of re-registering between platforms significantly simpler. This would also make it easier for platforms to negotiate discounts for their customers in the form of cash rebates paid directly back to their platform cash account.”
Bell also warned that the FCA should not impose greater degrees of commoditisation into a market which he believes has become increasingly more commoditised over time. He said doing so would stifle innovation, reduce customer choice and likely create unintended barriers for new market entrants as price becomes the only means by which products and services may be differentiated.
“A better solution would be to provide a level playing field between the world of funds and model portfolios, recognising that the risks and rewards associated with such products and services have a high degree of overlap. This would require a significant raising of standards and transparency for model portfolio disclosures which we would support,” he added.
The FCA is expected to publish its final platform market study report in the first quarter of 2019.
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